Italy's Monti runs into trouble over labor reform

ROME (Reuters) - Prime Minister Mario Monti's attempt to force through labor reform in Italy ran into political trouble on Thursday, raising the risk that the coalition supporting him in parliament could split or the measures be weakened.

The leadership of the centre-left Democratic Party (PD), which supports Monti, had initially seemed ready to accept the reform despite trenchant opposition from its close ally the leftwing CGIL union, which has called a day-long protest strike.

But overnight, apparently under pressure from the left of the party, leader Pier Luigi Bersani expressed anger over the technocrat premier's tactics in brushing aside opposition to the reforms.

"Pay attention. Monti cannot tell the PD to take it or leave it. You cannot do this," Bersani told a state television talk show on Wednesday night.

"Have I explained myself? No take it or leave it. We won't accept that. We will vote (for the reforms) when we are convinced," he added. The PD is the second biggest group in a grand coalition supporting Monti and essential if he is to get laws through parliament.

The reforms to employment protection laws dating back to the 1970s are central to Monti's drive to transform the euro zone's third-biggest economy and end a decade of stagnant growth.

They are also at the heart of a broader effort to restore confidence in the euro zone and are being closely watched on financial markets.

Even Enrico Letta, the PD's deputy leader and from the party's right wing, backtracked on support for Monti on the reforms on Thursday, saying there must be changes.

Angelino Alfano, leader of the biggest group, former premier Silvio Berlusconi's People of Freedom (PDL) party, shot back on Thursday that they would not allow the PD to weaken the law.

He told a radio program that his centre-right party would insist on their own changes in parliament if the PD tried to modify the reforms drawn up by Monti's technocrat government.

The CGIL, Italy's largest union, said it would call a general strike after Monti on Tuesday impatiently swept aside opposition to a key provision following weeks of negotiation, and said the time for talking was over.

CGIL head Susanna Camusso said Monti was putting all the burden for reforming Italy on workers and pensioners.

LEFTWING RESISTANCE

Monti may have underestimated the amount of resistance from the left to changes that would make it easier for companies to lay off employees for disciplinary or business reasons and he is now facing the biggest opposition since he took power four months ago.

The Democratic Party looks at risk of a serious split between its left wing, allied strongly with the CGIL, and a right wing largely formed from remnants of the defunct Christian Democrat party.

If it falls apart, as some analysts have long predicted, this would clearly undermine Monti's support in passing laws.

Labor Minister Elsa Fornero will meet employers and unions later on Thursday to fine-tune the labor reforms, which could be sealed by the government in a cabinet meeting on Friday before they are sent to parliament for approval.

Monti was appointed in November, replacing Berlusconi, as Italy's borrowing costs hit levels that forced Greece, Ireland and Portugal to take international bailouts.

With politicians and unions subdued by the financial emergency, Monti was able to rapidly push through tough austerity measures including a major pension reform, against only half-hearted opposition.

However, since then Monti's success in restoring faith in Italy, combined with two huge bank funding operations by the European Central Bank, have sharply reduced the country's borrowing costs, lessened the emergency atmosphere and reduced pressure on the politicians to swallow their misgivings.

The sticking point for the CGIL and the left is Article 18 of the labor code, a 42-year-old talisman for the unions of concessions they won from bosses in the heyday of their power that is a strong disincentive to firing workers.

Monti, who clashed with U.S. corporate giants Microsoft and General Electric during his years as a European Commissioner in Brussels, won plaudits initially for taking off the gloves and dumping an Italian tradition of reaching compromise agreements through interminable negotiations.

But it is this tactic which has riled the left the most. Monti said that since he had support from employers and two smaller, more moderate trade union confederations, he would forge ahead with a reform that was demanded last year by Italy's European partners.

The employers have welcomed the changes to laws they say make Italy uncompetitive by discouraging companies from hiring staff, hinder investment and condemn large numbers of young people to insecure, low-paid work, while older workers remain insulated in jobs for life.

More than 30 percent of 18 to 24-year olds in Italy are unemployed, and only about 57 percent of the population has a job.